Merrill and Burt (No 2)

[2017] FamCA 267

FAMILY COURT OF AUSTRALIA

MERRILL & BURT (NO 2) [2017] FamCA 267

FAMILY LAW – PROPERTY – SPOUSAL MAINTENACE – Interim – Whether husband has need for spousal maintenance and wife has capacity to maintain husband – Where consideration given to wife’s limited income – Where Court held wife has capacity to maintain husband arising from capital – Application allowed.

FAMILY LAW – EVIDENCE – PROCEDURE –Where husband seeks spousal maintenance pursuant to pursuant to s 90SG of the Family Law Act 1975 (Cth) – Where wife opposes application – Where Court considers the application is not ‘urgent’ – Where it would be more appropriate to make an order for interim spousal maintenance pursuant to pursuant to s 90SF of the Act.

Family Law Act 1975 (Cth) ss 90SB, 90SD, 90SE, 90SF, 90SG, 90SM

Edgar & Strofield [2016] FamCAFC 93
Hall & Hall (2016) 332 ALR 1
Maroney & Maroney [2009] FamCAFC 45
M & M (2006) FLC 93-283
Stein & Stein (2000) FLC 93-004
The Marriage of Williamson (1978) FLC 90-505

APPLICANT: Ms Merrill

RESPONDENT: Mr Burt

FILE NUMBER: MLC 9912 of 2013

DATE DELIVERED: 1 May 2017

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 13 April 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Bartfeld QC with Ms Fisken

SOLICITOR FOR THE APPLICANT: Farrar Gesini Dunn

COUNSEL FOR THE RESPONDENT: Mr Jones QC with Mr Hall

SOLICITOR FOR THE RESPONDENT: Efron & Associates

Orders

1. That the applicant wife do pay interim spousal maintenance to the respondent husband in the following manner:-

   (a)Seventeen (17) weekly payments of ONE THOUSAND AND TWENTY FOUR DOLLARS ($1,024) payable on the first Monday following the delivery of Judgment and weekly thereafter up to a maximum sum of SEVENTEEN THOUSAND FOUR HUNDRED AND EIGHT DOLLARS ($17,408).

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Merrill & Burt (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: MLC 9912  of 2013

Ms Merrill
Applicant

And

Mr Burt
Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. The Further Amended Initiating Application filed on 19 February 2016 by Ms Merrill (“the applicant”) and the Amended Response filed 2 March 2017 by Mr Burt (“the respondent”) came for final hearing in the Melbourne Registry of the Family Court of Australia on 22 August 2016. 

2. On 31 August 2016 the trial was adjourned part-heard for mention to 17 October 2016.  By order made 20 February 2017, the part-heard trial was listed for hearing on 3 April 2017.  The evidence was concluded on 13 April 2017.

3. The proceedings have been further adjourned to enable counsel to file written submissions and a date has been set for counsel to be further heard following which judgment will be reserved.

4. On 7 December 2016 the respondent filed an Application in a Case seeking orders that the applicant pay him periodic spousal maintenance in the sum of $2,500 per week from 23 November 2016 together with outstanding invoices “resulting from the ordinary living expenses of the de facto husband and their son”.  Accordingly, he is the respondent in the substantive proceedings and the applicant with respect to the issue of spousal maintenance.

5. The application was further amended on 28 December 2016. The substance of the orders have not changed but the amended application seeks that the respondent’s relief is sought pursuant to s 90SG of the Family Law Act 1975 (Cth) (“the Act”).

6. The respondent’s application for urgent spousal maintenance has been considered by way of mention at a number of hearings.

7. On 20 and 22 February 2017 I refused to hear the respondent’s application and on 28 February 2017 I ordered that the application for urgent spousal maintenance and the respondent’s Response filed 20 January 2017 be adjourned for mention to 3 April 2017, being the resumption of the substantive proceedings.

8. Paragraph 25 of my reasons records the following:-

   …I advised counsel that it was my intention in any event to adjourn the respondent’s application for urgent spousal maintenance to the first day of trial.  If the trial proceeds then further consideration can be given at the conclusion of the trial, however, if for some reason the trial does not proceed then at the very least the respondent’s application for spousal maintenance will be heard.

9. By Response filed 17 February 2017, the applicant opposes the respondent’s application and seeks that it be dismissed.  In addition, in her response, the applicant seeks orders that the property situate at L Street, Suburb E (“the L Street property”) be used as security for the applicant obtaining finance in the sum of $500,000 (of which the husband is to receive $35,000 by way of lump sum maintenance) and upon the Australian Taxation Office (“ATO”) issuing notices of assessment (anticipated to be in excess of $2.5 million), the L Street property is to be placed on the market for sale.

10. The applicant’s Amended Response filed 2 March 2017 also seeks orders for the distribution of the balance of the proceeds of sale of 5 M Street, Suburb D standing in the approximate sum of $227,470 following the agreement of the parties that a sum of $10,000 was to be paid to the respondent at the commencement of the resumed proceedings.

11. The applicant argues that the respondent’s application for maintenance is so intertwined with the orders sought by the applicant in her Response filed 17 February 2017 that both the application and the response should be heard together.

12. Whilst it may be considered convenient to have one hearing, I do not consider that a prior determination of the respondent’s maintenance application creates any prejudice to the applicant.

BACKGROUND

1. The respondent was born in1952 and is 65 years of age.  The applicant was born in 1968 and is 49 years of age.  The parties commenced cohabitation in April 1987 and separated in October 2013.  There are three adult children and one child of the relationship namely, FF born in 2000.

2. In late 2009, the respondent resigned as a director of relevant corporate entities and the applicant was appointed as a director.  From that date the applicant had effective control of the corporate entities and the assets held.  In particular, C Pty Ltd (“CPL”) owns property which produces net rental income of approximately $3,290 per week.  The applicant is not currently in employment and her income is by way of rental income net of management fees in respect of the property owned by the company.

3. The husband holds a Bachelor degree and practised in a professional capacity until his practising certificate was cancelled in October 2008.  He was declared bankrupt on 17 December 2010.

4. Following the parties’ separation, the applicant commenced proceedings in November 2013, initially in respect of parenting orders, but upon the cross-application of the respondent filed 18 June 2014, the respondent sought orders for property settlement.

5. The applicant argues that because of the respondent’s actions, it would not be just and equitable to make an order pursuant to s 90SM(1) of the Act. By considering the Addendum Case Outline filed on behalf of the applicant, whilst her position remains unchanged, the applicant considers that if the Court determines to exercise the jurisdiction, then orders for settlement of property should be such as to effect a 70/30 per cent split of the net property in favour of the applicant.

6. The respondent rejects the thrust of the applicant’s argument and asserts that the adjustment of the net property should be 70 per cent in his favour.  Without any attempt at precision, the respondent argues that taking into account money that the applicant has had and presumably spent, the outcome that he seeks would require the applicant to transfer her interest in the L Street property and her interest in CPL to him, with each party thereafter retaining their separate property free from claim by the other.  The respondent agrees to indemnify the applicant in respect of any outstanding ATO liability.

7. Whilst not yet the subject of agreement, the applicant updates the gross assets at $7,223,380 with liabilities  including her estimate of the ATO debt in the sum of $2,513,773 and estimate capital gains tax on the CPL property of $737,430, representing total liabilities at $3,384,555 with the net total of assets at $3,838,825.

8. There are further contingencies, namely a potential award if the VCAT proceedings are successful in the sum of $350,000, legal fees in relation to those proceedings estimated at $45,000 and legal fees owed in relation to a MLC insurance claim of $11,550.

9. The applicant has the sum of $227,470 standing to her credit being the balance of the proceeds of sale of the property located at 5 M Street, Suburb D.

10. It is conceded that the only income of the applicant is represented by the rental income from property held by CPL and any lump sum order could only be satisfied from the balance of monies following the sale of the 5 M Street property.

11. To date the parties have each received substantial distributions with the respondent having received a total of $445,000 pursuant to orders made on 19 October 2015, 8 February 2016 and 17 March 2017.  Whilst the payments to each of the parties have not as yet been characterised save as to the distribution of $10,000 paid to each of the parties by way of orders made 17 March 2017, it is not controversial that the respondent does not retain any residue of the money received by him.

12. There is no evidence as to how the respondent has spent the sum of $10,000 recently received, although the respondent’s counsel asserts that “most if not all of the [money] is needed to pay past amounts due for bills for everyday living and utilities”.

13. There is some history to the respondent receiving spousal maintenance.  By order made 6 August 2014, the applicant was ordered to pay interim spousal maintenance in the sum of $600 per week which was increased by agreement to $760 per week on 13 April 2015.  On 14 August 2015 the maintenance amount was increased to $1,450 per week until 25 October 2015.  Thereafter no further payments were made but the respondent did receive substantial lump sum payments as discussed.

14. It is the respondent’s position that his resources have now been entirely expended and at present his only income is that of an aged pension allowance of $438.55 per week together with money that he has borrowed from friends, family and according to his evidence, his legal practitioner.

URGENT SPOUSAL MAINTENANCE

1. Section 90SG of the Act provides:-

   If, in proceedings with respect to the maintenance of a party to a de facto relationship in accordance with this Division it appears to the court that:

   (a)the party is in immediate need of financial assistance; and

   (b)it is not practicable in the circumstances to determine immediately what order, if any, should be made;

   the court may order the payment, pending the disposal of the proceedings, of such periodic sum or other sums as the court considers reasonable.

2. There is no issue taken in respect of the geographical requirement pursuant to s 90SD of the Act and it is conceded that the Court can be satisfied of at least one of the matters in s 90SB of the Act.

3. An order under s 90SG of the Act does not necessarily require detailed affidavit material or financial evidence to be filed by the parties and any order made should of necessity be of limited duration pending the ability of the parties to file comprehensive evidence of their respective personal and financial circumstances.

4. Accordingly, there is a clear distinction in respect of the manner in which an application for an order pursuant to s 90SE of the Act enables the Court to consider more expansive evidence, thereby enabling the application of the matters to be taken into account pursuant to s 90SF of the Act.

5. The respondent’s counsel argues that orders pursuant to s 90SG are “stop gap orders” and that the procedure for urgent maintenance should be considered as “pragmatic”, see The Marriage of Williamson (1978) FLC 90-505.

6. Whilst the respondent strongly argues that the application should be considered by way of urgent spousal maintenance, the Court has the advantage of extensive affidavit material, statements of financial circumstances, together with the oral evidence of the parties tested under cross examination.

7. It could not be said that the application is urgent in the sense that it contemplates an order being made pending further hearing. No further evidence is to be heard and whilst the application is by necessity to be resolved at an interim hearing, where the Court has the benefit of the detailed particulars of the parties’ financial circumstances, it would be inappropriate for the matter to be determined pursuant to s 90SG of the Act and accordingly, if an order is to be made, it should be considered as interim spousal maintenance pursuant to s 90SF(1) of the Act.

8. By reference to the respondent’s Amended Response, the only reference to a final order for spousal maintenance is in respect of paragraph 8 of the final orders sought where in the circumstances of the Court’s determining that there should be no adjustment of property interests as between the parties, he seeks a lump sum payment pursuant to s 90SE of the Act requiring the applicant to transfer the remaining matrimonial assets to him.

INTERIM SPOUSAL MAINTENANCE

1. In Hall & Hall (2016) 332 ALR 1 the High Court considered the approach to be taken in determining an application for interim spousal maintenance as follows:-

   3.…the gateway to the operation of Pt VIII in relation to spousal maintenance is in s 72(1).  That subsection provides that“ [a] party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately…having regard to any relevant matter referred to in [s] 75(2)”.

   4.The liability of a party to a marriage to maintain the other party that is imposed by s 72(1) is crystalized by the making of an order under section 74(1).  That subsection provides that, “[i]n proceedings with respect to maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part”.

   5.A court exercising the power conferred by s 74(1) is obliged by s 75(1) to take into account the matters referred to in s 75(2) and only those matters.  Those matters are presented as a comprehensive check list.  They include what section 75(2)(b) refers to as “the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment”.  They also include, by virtue of s 75(2)(o), “any fact or circumstance which, in the opinion of the court, a justice of the case requires to be taken into account”.

   …

   8.Unlike a court exercising the power to make an urgent order conferred by s 77, a court exercising the power to make an interim order under s 74(1) must be satisfied of the threshold requirement in s 72(1) and must have regard to any matter referred to in s 75(2) that is relevant.  No doubt, on an application for an interim order “[t]he evidence need not be so extensive and the findings not so precise” as on an application for a final order.  But there is nothing to displace the applicability to an exercise of the power conferred by s 74(1) of the ordinary standard of proof in a civil proceeding now set out in s 140 of the Evidence Act 1995 (Cth). A court determining an application for an interim order under s 74(1) cannot make such an order without finding, on the balance of probabilities on the evidence before it, that the threshold requirement in s 72(1) is met having regard to any relevant matter referred to in s 75(2).

2. The respondent, seeking orders for spousal maintenance, carries the evidentiary burden and, as the Full Court said in Edgar & Strofield [2016] FamCAFC 93 at [15]:-

   … the limits to an interim hearing are well known.  Disputed issues of fact cannot be resolved at an interim hearing.

3. The issues to be determined therefore are the extent to which the respondent is unable to support himself by reason of age or physical or mental incapacity for appropriate gainful employment (s 90SF(1)(b)(ii)), the respondent’s reasonable needs and the extent of the applicant’s ability to meet those reasonable needs.

4. In determining the extent to which the respondent can support himself, I must have regard to the matters as set out in s 90SF(3) of the Act. In M & M (2006) FLC 93-283, the Court held:-

   [31]The question whether an applicant can support his or herself “adequately” is not to be determined by reference to any fixed or absolute standard but by having regard to the matters referred to in s 75(2); (Mitchell (supra) at p 81,995).

   [32]The question is not to be determined upon a “subsistence level” but upon consideration of whether the applicant can support himself or herself “adequately” importing a standard of living reasonable in the circumstances…

5. Further at [35]:-

   Thus in our view the trial judge was required to consider:-

   (a)whether employment was available to the wife having regard to the practical realities of her age, experience and confidence having been out of the workforce for a number of years; and

   (b)if so, the level of income the applicant might earn from such employment and whether in the circumstances of this case such income fell below adequate support and thus met the requirement of s 72.

6. The respondent is aged 65 years and purports to be in poor health arising from physiological and psychological conditions.

7. Irrespective of the respondent’s age, it is conceded that he will not return to the practice of his profession.  He is unsuited to any form of physical labour and there is a reality to acknowledging that he is unlikely to return to paid employment.  In evidence, the respondent conceded that he was exploring some opportunities to generate income, but nothing was likely to eventuate until the outcome of the proceedings was known.

8. Whilst I am yet to hear submissions in respect of matters relevant to the parties separate financial circumstances by reference to s 90SF(3) of the Act, I have little difficulty in finding that the respondent’s circumstances are such that he has little or no capacity to support himself between now and the final determination of the proceedings.

9. The extent of financial support required by the respondent is informed by his financial circumstances as set out in the Financial Statement filed 3 April 2017.  A consideration of Part G of the Financial Statement reveals modest fixed expenditure of $33 per week in respect of insurance and motor vehicle registration of $17, making a total of $50 fixed personal expenditure per week.  It is notable that whilst the respondent resides in the L Street property, the rates, taxes and other expenses associated with that property are currently paid for by the applicant.

10. The contention arises in respect of the respondent’s Part N expenses which currently total $3,204 per week.

11. The respondent argues that items of expenditure for and on behalf of his son should be brought to account.  The respondent apportions $1,174 by way of average weekly expenses for himself and $2,030 for his son.

12. Whilst the respondent may argue that the items of expenditure for and on behalf of his son should be considered as part of his total household expenditure, I do not propose to accede to that approach.  To do so would be to distort the process which requires the Court to consider the respondent’s financial needs.  I am required to be satisfied of the sum that he seeks by way of spousal maintenance which relates to his needs as opposed to the needs of a child or children.

1. Section 90SF(3)(d) of the Act requires the Court to consider:

   (d)commitments of each of the parties that are necessary to enable the party to support:

   (i)himself or herself; and

   (ii)a child or another person that the party has a duty to maintain…

2. The Full Court in Stein & Stein (2000) FLC 93-004 said as follows:-

   [49]It seems to us that in the context of an application for spousal maintenance in consideration in section 75(2)(d) of “the commitments of each of the parties are necessary to enable the party to support…a child…the party has a duty to maintain” has greater significance in determining the capacity of a payer to provide support rather than determining the extent to which the other party requires support.  In a maintenance case if, for example, a husband is called upon to pay maintenance for his wife, the Court must determine his capacity to pay the maintenance having regard to his obligation to support his children.  The level of support that the wife needs for herself is not dependent upon the level of support that she must give to others.  In a property case however, the extent to which a division of property may be seen as being appropriate might only properly be measured by examining all the demands that each spouse has to meet.

3. There has not been any attempt by the respondent to set out the evidence upon which the Part N items are based.  Obviously, the financial statement corroborates the respondent’s evidence that his expenses significantly exceed his income from all sources.  It is likely that to date, any shortfall has been satisfied by the respondent utilising monies provided by way of Court order, borrowing from friends and family and from having the advantage of some of the household expenses being paid by the applicant enabling the respondent to continue to reside in the L Street property.

4. It is not a matter for me to guess what should be a reasonable standard of living, or indeed whether the expenses as asserted by a party are able to be substantiated if put to proof.  I am entitled to have some regard when attempting to assess the veracity or liability of parties’ expenses, to bring to account a level of intuition and discretion.  In the circumstances, I consider that the respondent’s Part N expenses are within reasonable parameters save and except the expense of $350 relating to “physio, acupuncture, chiropractor, anti-smoking therapy, Medibank Private”.  There is no evidence in respect of those items of expenditure and I propose to adjust that amount by $200 leaving a balance of Part N expenses of $974 to which must be added to the balance of Part G expenses of $50, leaving a balance of $1,024 as representing the respondent’s reasonable requirements.

FINANCIAL POSITION OF THE APPLICANT

1. The Court is assisted by the Financial Statement filed by the applicant on 17 February 2017.  Her weekly income is in the sum of $3,290 which is entirely made up of rental income, net of management fees, relating to the property held by CPL.  It is not suggested that the applicant has the ability to source income other than via monies received through CPL.

2. The Part G fixed expenditure totals $2,472 per week.

3. Whilst the applicant does not pay child support for the child, it is conceded that she pays a significant proportion of his education and living costs as she does for the adult children.

4. The total of the Part N expenses is $6,419 which is comprised of $1,610 for the applicant’s expenses and $4,734 in relation to the children including expenses for the child who is in the care of the respondent.  It is conceded that the adult child SS has special needs and there are significant expenses in relation to that child which are unlikely to be the subject of opposition by the respondent.

5. There are however, expenses of the applicant which should reasonably be the subject of amendment.

6. Accordingly, I propose to amend the applicant’s expenses for herself as follows:-

Item	Claimed	Allowed
Food	$450	$300
Fares/ Car parking	$250	$100
Cleaning of house	$100	$50
Internet	$35	$25

1. Accordingly, I propose to reduce the weekly expenditure of the applicant currently claimed in the sum of $1,610 to $1,250.  The total of the Part G and Part N expenses in relation to the applicant are in the sum of $3,722.

2. That calculation ignores an appropriate sum in relation to some of the reasonable expenses in respect of the children, in particular for SS and FF.  It is difficult to apportion the expenses claimed in relation to those children, but in any event for the purposes of determining the applicant’s ability to support the respondent’s shortfall of $1,024, I am satisfied that the applicant has no capacity to do so from the rental income that she receives.

USE OF CAPITAL

1. In Maroney & Maroney [2009] FamCAFC 45 the Full Court said at [56]:-

   …Once a party…establishes an entitlement to interim spousal maintenance, and such entitlement is quantified in accordance with that spouse’s reasonable needs, an order may be made notwithstanding that the liable spouse could only satisfy the order out of capital or borrowings against capital assets.

2. The balance of the proceeds of sale of 5 M Street, Suburb D currently stand at about $227,470.  The net proceeds have gradually dwindled as a result of various orders which provided substantial lump sum payments to each of the parties.

3. There are however, limitations on the Court’s preparedness to treat the monies held as being entirely available for the respondent’s support.

4. The applicant has a pending response which seeks that the balance of the funds held be applied in the following manner:-

   (1)The sum of $45,000 to HH Solicitors for the VCAT proceedings;

   (2)The sum of $11,550 to GG Lawyers;

   (3)The sum of $30,000 to the applicant;

   (4)The sum of $32,500 to V School; and

   (5)The balance of approximately $152,877 to Farrar Gesini Dunn.

5. Whilst not the subject of agreement, the applicant asserts that in relation to O Pty Ltd as trustee for the 6 M Street Unit Trust, there is tax payable in the sum of $120,192.  The calculation as undertaken by the ATO suggests that there is income tax payable of $400,357 and GST of $135,250.

6. Exhibit 10 in the proceedings represents a comprised position and sets the potential tax payable at $161,653.

7. Adopting a conservative approach, it is reasonable to bring to account the potential for tax assessment in the sum of $161,653 leaving a balance of $75,817.

8. The respondent has not explained how the sum of $10,000 provided to him on 17 March 2017 has been expended, but I accept that he has outstanding personal bills in the sum of $6,500, leaving a balance of $3,500.

9. Taking into account the future conduct of the proceedings, it would be reasonable for the respondent to receive spousal maintenance for a period of 20 weeks as and from 17 March 2017.  The total amount at the rate of $1,024 per week would be $20,480.  I propose to deduct the balance of the lump sum received of $3,500, leaving a balance of $16,980.

10. I propose to order that the applicant cause the respondent to be paid the sum of $1,024 per week up to a maximum of 17 weeks.

11. Whilst the respondent seeks that spousal maintenance be payable as and from 23 November 2016, given that I have found that the ability of the applicant to pay spousal maintenance is not available from income but rather, from the limited and dwindling lump sum standing to the credit of the applicant in her solicitors trust account, the applicant’s refusal to concede the respondent’s application was reasonable given that it was only at the conclusion of the evidence that the potential of further claims in respect of the lump sum retained were able to be crystalized.

12. I make orders as appear at the commencement of these reasons.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 1 May 2017.

Associate: 

Date:  1 May 2017